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Is China a Ukrainian ally?

gefira.org

Waving flag of Ukraine and China
photo shutterstock.com/Aleksandar Mijatovic

China is taking cautious international steps, following its national interests. Much to the Western man’s regret, it did not let itself be dictated to how to respond to the Russian incorporation of Crimea. Still, China kept Ukrainian economy alive in the aftermath, thus strengthening the Ukrainian-Chinese cooperation.

The New Silk Road

As the EU and USA cannot finance all the infrastructural projects in Ukraine, the country is turning to China for help, which in turn is interested in Ukraine as an indispensable part of the New Silk Road. Already in 2013 former Ukrainian President Viktor Yanukovych signed a number of agreements with China,1)Переломный визит Януковича в Китай: $30 млрд инвестиций и гарантированная квота для украинской продукции, Economics 2013-12-09.among them one that with the aid of China’s $13 billion envisaged turning Crimea into a huge transit hub. The Russian military actions thwarted these plans, which were later shifted to Southern Ukraine.

The New Silk Road through Ukraine could become beneficial to both China and Ukraine. Last year the trial freight train from Odessa, Ukraine, through Georgia, Azerbaijan, Kazakhstan to China, using ferries across the Black and Caspian Seas but bypassing Russia, received Chinese official support and Chinese companies are expected to follow suit. The journey lasted 15 days, which is planned to be reduced to 9 days. The Chinese government has pushed for the creation of a Ukrainian-Chinese commission on the prospective “Silk Road” to discuss a package of transport infrastructure projects to make Ukraine’s transit capacity higher. Also European companies have expressed their interest in the new route.

Interestingly enough, due to the intensification of trade with countries participating in the new road China can earn the whereabouts of $2.5 trillion of annual turnover 10 years after the start of the New Silk Road. Starting from 2015, the country already invested $15 billion in various projects within the New Silk Road, however the announced sum of investment projects within its implementation amounted to $75.9 billion as of June 2016.2)Foreign Policy Audit. How to revive Ukrainian-Chinese relations, Euromaidan 2016-12-07.

Still, the project is not so colorful as it might seem at first. The logistics calls for improving, the time and cost of the transit should be decreased. Ukraine, Georgia, Azerbaijan and Kazakhstan also need to agree on preferential tariffs. The economic factor remains the decisive one for the New Silk Road. The present transit trough Russia takes 14 days and is twice cheaper than the new one. If Ukraine could outperform its northern neighbour in this respect, it would gain a geopolitical importance and become the first European country to participate in the New Silk Road.3)Ukraine carving out a role in China’s Silk Road strategy, Asia Times 2016-09-24.

Economic cooperation

The Chinese-Ukrainian trade cooperation holds great promise. Due to the low demand generated by the impoverished population, Ukraine is not perceived by China as a recipient of its goods but rather as a transit country. Ukrainian proximity to the European Union, its political allegiance to it (Deep and Comprehensive Free Trade Agreement) could attract Chinese investment and manufacturing. Also the EU is directly interested in modernizing Ukraine, using Chinese money. The CEO of the Chinese Commerce Association, Ruslan Osypenko, states that China appreciates reforms in Ukraine and its companies are taking an increasing interest in the country, which manifests itself in their uniting in a Chinese Commerce Association.

Cooperation in agriculture is extremely important for both countries. Just as an aside: already in 2015 Ukraine overtook the USA as China’s number one corn supplier.4)Why China Is Interested in Ukraine, The Diplomat 2016-03-10.

Another important part of Chinese-Ukrainian relations is the military-technical cooperation. China is the world’s 5th military exporter (USD 6,4 bln) and the country searches for new technologies, especially in the countries where fundamental and applied sciences do not have proper financing. Ukraine has a huge military production potential inherited from the Soviet Union times, however most enterprises lack funds and new technologies. After 2014 Ukraine increased its exports of military equipment to China for it to take 13% of the whole military imports of China. Ukraine manufactures engines for the Chinese military: lately 2 Zhubr ships were sold. Surely, the real military cooperation must be wider (most information is classified). This can become a basis for stronger bilateral partnership.5)Україна – Китай. Від житниці до стратегічного співробітництва, Хвиля 2016-09-04.
Ukraine, having a corresponding technological and industrial background, is particularly interested in cooperation with China in the space sector. Ukraine needs funding, while China is turning into one of the leading investors in space exploration. Kiev is now fulfilling 21 contracts with China worth a total of over $67 million and has recently implemented its own 5-year program of space industry development (2012-2017).

China would also like to invest in telecommunication (Huawei is already popular in Ukraine), and traditional and alternative energy (‘Naftogaz Ukraine’ got a $3.6 billion credit from National Development Bank of China and CNBM Company owns several solar power plants in the Odessa region, with the whole investment worth $1 billion).6)China is ready to invest in Ukraine, E-dinar 2016-07-28.

The magnitude of the overall Ukrainian-Chinese trade is not impressive. Presently, Ukraine is mostly a supplier of resources of fourth production circle. Due to this fact, China is not interested in a bigger investment in the country, such as building schools and hospitals for political dividends like it does in Angola or Congo. It can be stated that for the time being Ukraine is not in the Chinese soft power vector. China is buying in Ukraine what it needs, without however spoiling its relations with big political players. Still, the cooperation with Ukraine is not the last item on the Chinese government’s agenda. It should also be noted that China will support Ukraine politically in proportion to the tightening economic relations between the two countries. The specificity of Chinese companies is that they make decisions in compliance with the government’s foreign policy, which is why the Ukrainian government has to invent such political environment as to attract the attention of Beijing. 4th technological paradigm counts for 38 % of the country’s economy, while 57,9% goes for 3rd one.

Political implication

Most Western and Ukrainian politicians complain about China being Russia’s close ally. It is not completely true, though. To make it clear, China has its strategic interests in foreign relations and cooperates with various countries as long as it is beneficial to China. After the Russian annexation of Crimea, China called for a constructive dialogue to find a proper political decision and stated that sanctions could not be effective and that it would not implement them. For fear of losing its important partnership with Russia, China could not respond differently. Yet Ukraine’s integration with the EU is of geopolitical interest to China, if only because of the formation of the New Silk Road.
Generally speaking, Chinese interest in the European countries is growing. After Trump’s election there is a certain vacuum and uncertainty in the European Union. On its part, Russia would like to use the lack of American strong response to the Ukraine crisis and urge European states to resurrect good relations with Russia. China is using the opportunity of this vacuum in the EU as well. The similar logic may apply to Ukraine. The country has lost its biggest trade partner – Russia, and the EU could not substitute for Russia fully, nor has it the needed amount of money to invest in Ukraine. Now since Ukraine is in need of considerable support, it will readily accept China’s investment and presence on its soil.
The economic cooperation during the Ukraine crisis has been growing steadily for the last 3 years.

At the World Economic Forum in Davos this year, the Chinese president told his Ukrainian counterpart that China was interested in close cooperation with Ukraine and in resolving the crisis. With previous guarded Chinese attitude to the Russian aggression against Ukraine, this new turn is quite interesting.7)China’s Xi says willing to help resolve Ukraine crisis, Reuters 2017-01-17.

On the other hand, there is an issue Ukraine should analyze before accepting Chinese assistance. Chinese investment in Africa raised big concerns about the quality of Chinese infrastructure, labour abuse and human rights violations. Ukraine should think it over before accepting the partnership with an authoritarian state. Some would claim that China has never supported the development of democracy in the world or helped any country in the implementation of democratic standards and human rights. Therefore, such a cooperation could be risky to Ukrainian fragile democracy.

Cooperation with Ukraine is beneficial to the Chinese desire to decrease its dependence on Russia in many ways. For Ukraine, China could rescue the country from economic collapse with its money and new technology.8)Chinese investment might sacrifice Ukraine’s democratic dream for economic needs, Business Insider 2016-08-17.
Although Ukraine is seeking democratic development, the country should not abandon the cooperation with non-democratic states on fair economic conditions. With all the issues, Chinese-Ukrainian cooperation can have a potential.

References   [ + ]

1. Переломный визит Януковича в Китай: $30 млрд инвестиций и гарантированная квота для украинской продукции, Economics 2013-12-09.
2. Foreign Policy Audit. How to revive Ukrainian-Chinese relations, Euromaidan 2016-12-07.
3. Ukraine carving out a role in China’s Silk Road strategy, Asia Times 2016-09-24.
4. Why China Is Interested in Ukraine, The Diplomat 2016-03-10.
5. Україна – Китай. Від житниці до стратегічного співробітництва, Хвиля 2016-09-04.
6. China is ready to invest in Ukraine, E-dinar 2016-07-28.
7. China’s Xi says willing to help resolve Ukraine crisis, Reuters 2017-01-17.
8. Chinese investment might sacrifice Ukraine’s democratic dream for economic needs, Business Insider 2016-08-17.